HR 5057 IH

To prevent and punish counterfeiting and copyright piracy, and for other purposes.

JUNE 27, 2002

Mr. SMITH of Texas (for himself, Mr. KELLER, Mr. SCOTT, Mr. SCHIFF, Mr. ISSA, and Mr. DOGGETT) introduced the following bill; which was referred to the Committee on the Judiciary

To prevent and punish counterfeiting and copyright piracy, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Intellectual Property Protection Act of 2002'.

SEC. 2. FINDINGS.

Congress finds that--

(1) American innovation, and the protection of that innovation by the government, has been a critical component of the economic growth of this Nation throughout the history of the Nation;

(2) copyright-based industries represent one of the most valuable economic assets of this country, contributing over 5 percent of the gross domestic product of the United States and creating significant job growth and tax revenues;

(3) the American intellectual property sector employs approximately 4,300,000 people, representing over 3 percent of total United States employment;

(4) the proliferation of organized criminal counterfeiting enterprises threatens the economic growth of United States copyright industries;

(5) in 2001, the United States entertainment software industry lost $1,800,000,000 in revenue, and the business software industry lost $11,000,000,000 worldwide, due to piracy;

(6) in 2001, the motion picture industry lost $3,000,000,000 in potential worldwide revenue, the music industry lost $4,300,000,000 worldwide, and the publishing industry lost $636,000,000 worldwide, due to piracy, and these figures do not include losses due to online piracy;

(7) the American intellectual property sector has invested millions of dollars to develop highly sophisticated physical authentication features that assist consumers and law enforcement in distinguishing genuine intellectual property products and packaging from counterfeits;

(8) in order to thwart these industry efforts, counterfeiters traffic in, and tamper with, genuine physical authentication features, for example, by obtaining genuine physical authentication features through illicit means and then commingling these features with counterfeit software or packaging;

(9) Federal law does not provide adequate civil and criminal remedies to combat tampering activities that directly facilitate counterfeiting crimes; and

(10) in order to strengthen Federal enforcement against counterfeiting of copyrighted works, Congress must enact legislation that--

(A) prohibits trafficking in, and tampering with, physical authentication features of copyrighted works; and

(B) permits aggrieved parties an appropriate civil cause of action.

SEC. 3. PROHIBITION AGAINST TRAFFICKING IN ILLICIT PHYSICAL AUTHENTICATION FEATURES.

(a) IN GENERAL- Section 2318 of title 18, United States Code, is amended--

(1) by striking the heading and inserting `Trafficking in counterfeit labels, illicit physical authentication features, or counterfeit documentation or packaging';

(2) by striking subsection (a) and inserting the following:

`(a) Whoever, in any of the circumstances described in subsection (c), knowingly traffics in--

`(1) a counterfeit label affixed to, or designed to be affixed to--

`(A) a phonorecord;

`(B) a copy of a computer program;

`(C) a copy of a motion picture or other audiovisual work; or

`(D) documentation or packaging;

`(2) an illicit physical authentication feature affixed to or embedded in, or designed to be affixed to or embedded in--

`(A) a phonorecord;

`(B) a copy of a computer program;

`(C) a copy of a motion picture or other audiovisual work; or

`(D) documentation or packaging; or

`(3) counterfeit documentation or packaging,

shall be fined under this title or imprisoned for not more than 5 years, or both.';

(3) in subsection (b)--

(A) in paragraph (2), by striking `and' at the end;

(B) in paragraph (3)--

(i) by striking `and `audiovisual work' have' and inserting the following: `, `audiovisual work', `sound recording', and `copyright owner' have'; and

(ii) by striking the period at the end and inserting a semicolon; and

(C) by adding at the end the following:

`(4) the term `physical authentication feature' means any visually perceptible hologram, watermark, certification, symbol, image, sequence of numbers or letters, or other physical feature that either individually or in combination with another feature is used by the respective copyright owner to verify that a phonorecord, a copy of a computer program, a copy of a motion picture or other audiovisual work, or documentation or packaging is not counterfeit or otherwise infringing of any copyright;

`(5) the term `documentation or packaging' means documentation or packaging for a phonorecord, copy of a computer program, or copy of a motion picture or other audiovisual work; and

`(6) the term `illicit physical authentication feature' means a physical authentication feature, that--

`(A) is genuine in origin, but, without the authorization of the respective copyright owner, has been tampered with or altered for the purpose of inducing a third party to reproduce or accept distribution of--

`(i) a phonorecord;

`(ii) a copy of a computer program;

`(iii) a copy of a motion picture or other audiovisual work; or

`(iv) documentation or packaging;

where such reproduction or distribution violates the rights of the copyright owner under title 17;

`(B) is genuine, but has been distributed, or is intended for distribution, without the authorization of the respective copyright owner and not in connection with the lawfully made copy or phonorecord to which such physical authentication feature was intended to be affixed or embedded by the respective copyright owner; or

`(C) appears to be genuine, but is not.';

(4) in subsection (c)--

(A) by striking paragraph (3) and inserting the following:

`(3) the counterfeit label or illicit physical authentication feature is affixed to, is embedded in, or encloses, or is designed to be affixed to, to be embedded in, or to enclose--

`(A) a phonorecord of a copyrighted sound recording;

`(B) a copy of a copyrighted computer program;

`(C) a copy of a copyrighted motion picture or other audiovisual work; or

`(D) copyrighted documentation or packaging; or'; and

(B) in paragraph (4), by striking `for a computer program';

(5) in subsection (d)--

(A) by inserting `or illicit physical authentication features' after `counterfeit labels' each place it appears;

(B) by inserting `or illicit physical authentication features' after `such labels'; and

(C) by inserting before the period at the end the following: `, and of any equipment, device, or materials used to manufacture, reproduce, or assemble the counterfeit labels or illicit physical authentication features'; and

(6) by adding at the end the following:

`(f) CIVIL REMEDIES FOR VIOLATION-

`(1) IN GENERAL- Any copyright owner who is injured by a violation of this section or is threatened with injury, may bring a civil action in an appropriate United States district court.

`(2) DISCRETION OF COURT- In any action brought under paragraph (1), the court--

`(A) may grant 1 or more temporary or permanent injunctions on such terms as the court determines to be reasonable to prevent or restrain violations of this section;

`(B) at any time while the action is pending, may order the impounding, on such terms as the court determines to be reasonable, of any

article that is in the custody or control of the alleged violator and that the court has reasonable cause to believe was involved in a violation of this section; and

`(C) may award to the injured party--

`(i) reasonable attorney fees and costs; and

`(ii)(I) actual damages and any additional profits of the violator, as provided by paragraph (3); or

`(II) statutory damages, as provided by paragraph (4).

`(3) ACTUAL DAMAGES AND PROFITS-

`(A) IN GENERAL- The injured party is entitled to recover--

`(i) the actual damages suffered by the injured party as a result of a violation of this section, as provided by subparagraph (B); and

`(ii) any profits of the violator that are attributable to a violation of this section and are not taken into account in computing the actual damages.

`(B) CALCULATION OF DAMAGES- The court shall calculate actual damages by multiplying--

`(i) the value of the phonorecords or copies to which counterfeit labels, illicit physical authentication features, or counterfeit documentation or packaging were affixed or embedded, or designed to be affixed or embedded; by

`(ii) the number of phonorecords or copies to which counterfeit labels, illicit physical authentication features, or counterfeit documentation or packaging were affixed or embedded, or designed to be affixed or embedded,

unless such calculation would underestimate the actual harm suffered by the copyright owner.

`(C) DEFINITION- For purposes of this paragraph, the term `value of the phonorecord or copy' means--

`(i) the retail value of an authorized phonorecord of a copyrighted sound recording;

`(ii) the retail value of an authorized copy of a copyrighted computer program; or

`(iii) the retail value of an authorized copy of a copyrighted motion picture or other audiovisual work.

`(4) STATUTORY DAMAGES- The injured party may elect, at any time before final judgment is rendered, to recover, instead of actual damages and profits, an award of statutory damages for each violation of this section in a sum of not less than $2,500 or more than $25,000, as the court considers appropriate.

`(5) SUBSEQUENT VIOLATION- The court may increase an award of damages under this subsection by 3 times the amount that would otherwise be awarded, as the court considers appropriate, if the court finds that a person has subsequently violated this section within 3 years after a final judgment was entered against that person for a violation of this section.

`(6) LIMITATION ON ACTIONS- A civil action may not be commenced under this section unless it is commenced within 3 years after the date on which the claimant discovers the violation.

`(g) OTHER RIGHTS NOT AFFECTED- Nothing in this section shall enlarge, diminish, or otherwise affect liability under section 1201 or 1202 of title 17.'.

(b) TECHNICAL AND CONFORMING AMENDMENT- The item relating to section 2318 in the table of sections at the beginning of chapter 113 of title 18, United States Code, is amended to read as follows:

`2318. Trafficking in counterfeit labels, illicit authentication features, or counterfeit documentation or packaging.'.

END